Aging population in China, why not to be pessimistic over

It is wrong to feel pessimistic about the impact of aging in China because economic growth can be driven not only by the expansion of the labor force but also by continuous technological innovation and industrial upgrading, a senior economist said.

With the demographic changes, the number of working people will be reduced. But the most important thing is not the number of working people, but how effective they provide their labor input, which largely depends on education, said Justin Yifu Lin, dean of Peking University's Institute of New Structural Economics.

In China, the average education years of the working population is about 10 years currently. However, the corresponding figures for new workers and retiring workers are respectively about 13.4 years and six years, Lin said, stressing that means China's effective labor input in general actually is on the rise instead of declining.

Lin, who is a former chief economist and senior vice-president of the World Bank, also said that export control measures and restrictions in high-tech areas by some countries on China will hurt themselves harder, while the negative impact on China is not as big as they expect.

For instance, the additional tariffs by the United States have caused some relocation of production outside China to other countries like Indonesia and Malaysia, but as those countries' direct exports increase, China's exports to those countries have also increased, he said, adding that is because most of the relocated production is in the final stage, or the assembly of products, for which countries like Indonesia still relies on China for the intermediate equipment and components.

As for the high-tech sector, he said China provides a huge market no foreign high-tech company can ignore because they need high profitability to support their vast investment into research and development to keep their competitiveness.

"As long as China maintains dynamic economic growth and open our markets, I think most companies and most nations will not have the incentive to restrict their access to the Chinese market," he said, adding that even though a few technologies are monopolized by the US and the US is willing to sacrifice economic benefit for political benefit, China has already reached a stage to be able to mobilize enough domestic capacity, resources, and talent when necessary to get breakthrough in those areas in a few years.

The economist also said that governments should use industrial policy to facilitate technological innovation and industrial upgrading.

He said China can adopt industrial policies to overcome market failures and support entrepreneurs, to turn sectors with potential comparative advantages into sectors with actual comparative advantages.

liuzhihua@chinadaily.com.cn